Sources of Finance Essay Example | Topics and Well Written Essays - 750 words

Sources of Finance - Essay ExampleThe equity market (also known as the argumentation-taking market) is the market for trading equity instruments (Federal Reserve Bank of San Francisco, 2005). Shares are the securities issued to the general public and its ownership implies melodic phrase ownership.There are two different types of shares Equity shares and Preference shares (Finance.mapsofworld.com, 2013). One of the examples of the equity instrument is common stock shares, publicly traded on national and global Stock exchanges (Federal Reserve Bank of San Francisco, 2005).Debts are the financial instruments traded for a long uttermost of period. Example of debt instruments are mortgages and bonds (either corporate or government) (Federal Reserve Bank of San Francisco, 2005). Loans are minded(p) by Banks, insurance companies or financial institutions in order to provide working capital or finance capital equipment (Term loan, 2006). Various banks including commercial banks, indust rial development banks, and cooperative banks give medium-term loans for a period of 3-5 years (Finance.mapsofworld.com, 2013). Financial institutions established by State and Central governments give long term loans (Finance.mapsofworld.com, 2013). In order to get long term loan the company is required to limit dividends, to meet nominal working capital and debt to net, etc. (Term loan, 2006). If the company is granted the loan, it is amortized over a fixed period of time (Term loan, 2006). Loans as a source of long-term financing have some obvious benefits to the borrowers, as the tip and interest are the figures that can be calculated and planned in budget. Also, the duration of the business kindred is defined in the contract and normally ends when the debt is paid out (National Federation of Independent Business, 2009).Equity financing allows a business entity to acquire funds without generating debt obligations. When the company issues shares usually there is no debt burden on the company